Book: The Age of Deleveraging by A. Gary Shilling
The age of deleveraging

Book: The Age of Deleveraging by A. Gary Shilling

By Farinha | Books I am reading | 9 Feb 2021

BOOK: The age of deleveraging

Author: A. Gary Shilling

Publishing date: 2011


“First, I believe that human nature changes very slowly, if at all, over time. So people will react to similar circumstances in similar ways. This means that history is relevant. Of course, history doesn´t repeat itself, but as Mark Twain noted, it does rhyme. This means that forecasting remains an art, not a science. Still, if you can find circumstances in the past that resemble closely those at present, their resolution back then may be a useful guide to future events.”


“Federal government involvement in the economy had been growing since it was initiated in a major way by the New Deal reaction to the Great Depression. It´s debatable whether those programs were responsible for economic revival. Indeed, it can be argued that government involvement created uncertainty and fear among business people and markets and thereby impeded recovery. It´s also likely that rearmament and World War II were instrumental in ending the Great Depression.

But the economy did revive and World War II was a successful one, so Americans associated increasing government involvement in the economy with economic growth. Both the economy and government´s role in it were rising together, but note that you can´t prove casuality with statistics”


“New tech inevitably kills itself with over investment, excess capacity, excruciating competition, and commoditization of its products, and is superseded by even newer tech, we noted. Consumers win big from newer tech, but investors have to be lucky to pick the few eventual winners. In previous tech bubbles like railroads in the late 1800s and autos in the 1920s, many companies were started, but few survived.”


“People need to save for contingencies, their kids´ educations, health care emergencies, and retirement. And until recently, they didn´t, as witnessed by the quarter-century decline in the household saving rate. To make matters worse, they borrowed excessively, pushing total consumer and residential mortgage debt from 60 percent of after-tax income to 135 percent, as discussed earlier.

But additional saving curtails spending. So when the majority does what is in their individual best interest and favors saving over spending, the aggregate economy suffers a lack of demand. Economists call this the fallacy of composition. What´s good for on isn´t good for all.”


“Some, however, suggest that slower economic growth will bring slower growth in productivity. That would reduce the upward pressure on the unemployment since more people would be employed than with faster productivity growth. But there´s no evidence that productivity growth necessarily slows with a chronically weak economy. In the depressed 1930´s, productivity grew 2,39 percent annually, among the highest decades since 1900. In that decade, much of the new technology of the 1920´s – electrification of homes and factories and mass-produced automobiles – was being implemented, despite the Great Depression and its slow growth aftermath, as mentioned earlier.

Similarly, as noted earlier, the new-tech burst of the past decade or so in computers, the internet, biotech, telecom, and semiconductors will no doubt promote rapid productivity growth in coming years.”


The age of deleveraging

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Wannabe farmer. Studied ceramic design. Working as a porcelain craftsman for more than 10 years. Love economics and have been studing it for the past 7 years.

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